USPS Tells Congress To Use Retirement Savings for Health Benefits

The U.S. Postal Service urged Congress yesterday to put its future Civil Service Retirement System reform savings toward paying for postal employee retiree health benefits, an estimated $40 billion to $50 billion liability.

The USPS also recommended that Congress relieve it of the responsibility of paying for its employees' military service benefits, a burden that no other federal agency shares. The USPS suggestions came as part of a report to Congress, the Bush administration and the General Accounting Office that was due yesterday.

The Treasury Department and the Office of Personnel Management also are submitting recommendations.

In April, Congress passed a bill lowering the postal service's contributions into the CSRS, saving the USPS $2.9 billion in fiscal year 2003 and $2.6 billion in FY 2004. The savings let postmaster general John E. Potter guarantee that postal rates would not rise until calendar year 2006.

However, after FY 2004, savings from the legislation must be placed in escrow, and by Oct. 1, 2005, the postal service must be prepared to pay $3.2 billion toward the escrow fund. In addition, paying for the military benefits of its employees would cost the USPS $27 billion, said Richard Strasser, USPS chief financial officer.

However, if Congress abolished the escrow requirement and lifted the military benefits burden, the USPS would have an excess of $10 billion, Strasser said. Congress, the GAO and the presidential postal reform commission have voiced concerns about the postal service's liability for retiree health benefits, he said.

"This takes care of the last aspect of our financial condition that the GAO was concerned about," Strasser said.

If Congress chose not to take those actions, the postal service's alternative recommendation would be to take some of the money in the escrow fund and use it to begin pre-funding the health benefits of postal employees hired after 2002, Strasser said. The rest of the escrow fund could be used to lower the effect of new expenses on rates starting in 2006.

The GAO has 60 days to issue a report on the recommendations, after which Congress has set a target of 180 days on which to act on the issue. The congressional target time is not binding, but the timing is important because the USPS will begin planning for its next rate case soon after, Strasser said.

Mailers expect the USPS to file the next rate case by the end of 2004. Many are concerned that without congressional action on the CSRS issue, the rate case will be in the double digits, as deputy postmaster general John Nolan warned at the National Postal Forum in Kansas City last month.